Quick Facts

Openness to global trade and investment is a core strength of Liechtenstein’s small economy. A high degree of macroeconomic and political stability minimizes uncertainty, and the transparent regulatory framework supports the operation of numerous small and medium-sized enterprises. Liechtenstein remains unranked in the 2016 Index because of the lack of readily available comparable statistics on the economy.

Background

Prince of Liechtenstein Hans-Adam II is head of state, but his son Prince Alois wields considerable power as regent. The center-right Progressive Citizens’ Party won the March 2013 parliamentary elections, and Prime Minister Adrian Hasler heads the government. Liechtenstein has a vibrant free-enterprise economy. Low taxes and traditions of strict bank secrecy (though less strict than before) have helped financial institutions to attract funds, but the worldwide financial crisis led to a sharp contraction in the banking sector. In 2009, the Organisation for Economic Co-operation and Development removed Liechtenstein from its list of uncooperative tax havens. The principality’s economy is closely linked to Switzerland, whose currency it shares, and the European Union. Liechtenstein is a member of the European Free Trade Association and the European Economic Area but not the EU.

Politics and society are largely free of corruption. Although Liechtenstein is a leading offshore tax haven and traditionally has maintained tight bank secrecy laws, the government has made efforts in recent years to increase transparency in banking. The judiciary is independent and impartial despite the appointment of judges by the hereditary monarch. Property rights and contracts are secure.

Liechtenstein imposes relatively low taxes on nationals and non-nationals. Under the tax reform law that became effective in January 2011, the tax system has become more modern and attractive. The corporate tax rate is now a flat 12.5 percent, and capital gains, inheritance, and gift taxes have been abolished. Although the fiscal system lacks transparency, government fiscal management has been relatively sound.

The entrepreneurial environment is supported by efficient and transparent regulations. Administrative procedures are straightforward and applied consistently. The labor market is dynamic, and unemployment traditionally has been very low. Liechtenstein has a de facto monetary union with Switzerland, although the principality has no say in the Swiss National Bank’s monetary policies.

Liechtenstein has a 0 percent average tariff rate. Agricultural imports face non-tariff barriers. Imports are not subject to anti-dumping or countervailing duty laws. Foreign and domestic investors are generally treated equally under the law. There are no restrictions on repatriation of profits or currency transfers. Liechtenstein is a major financial center, particularly in private banking. The banking sector remains stable under a sensible regulatory regime.